The Prairie FIRE Financial Independence Policy Statement

Transcription

1 The Prairie FIRE Financial Independence Policy Statement This is the first draft of the Financial Independence Policy Statement for the Prairie FIRE Family. The purpose of the FI Policy Statement is to act as a guide and map to my path to financial independence (FI). I will take the time to review this annually to make sure that everything is going according to plan. Click here to find out what is and how to create your own FI Policy Statement. Our FI Philosophy Values: The Prairie FIRE family is driven and founded on our values. We want our spending and investing to reflect those values: Stewardship: We understand that we do not own the money, home, resources, and people that have come into our lives. Instead, we see ourselves as stewards and are responsible to look after these gifts and use them to our best ability to make a better world. We believe being a good steward means living within our means and not depending on credit and getting into consumer debt to support our day-to-day living. Home: Having a good, stable, and welcoming home is important to us. We want to invest in a house, neighbourhood, and community that we can make better and long-lasting. Family: We make our family a priority, making sure their p resent and future needs are taken care of and that we spend as much time together to support each other throughout our life. Friendships: We want to have healthy and supportive relationships with our friends. We want to do this by showing hospitality, grace and a welcoming space for people to feel safe and supported. The best way for us to do this is to have a good homebase for people to visit and experience life together. Giving Back: We believe in giving back and investing in the community we live in. This includes tithing, donating to causes we believe in, and volunteering.

2 Our Money Priorities When we receive income, money will go the following areas first: Priority Focus 1. Basics: Food,, property taxes, utilities, etc. 2. Debt Repayment 3. Giving/Tithing 4. Investment Savings (RRSP, RESP, TFSA, Emergency Fund 5. Home Improvements My FI Goals, Strategies, Objectives & Tactics My FI Target Date: 2033 My FI Number: $1.4 million (click here to find out how I calculated my current FI Goal) Specific Measurable Attainable Relevant Timely (SMART) Goals/Objectives/Tactics Goal Strategy Objective Tactic Timeline/Status To grow an investment savings portfolio to $1.4 million by 2033 Objective: Build up an investment savings portfolio Tactic: Find a full service financial adviser Tactic: Max out matching work pension contributions Automated - Goal 1:Reach FI by 2033 Objective: Increase overall monthly savings rate to 35% Tactic: Create a Budget Tactic: Create automatic savings/contributions to investment savings 7% Pension 2% TFSA 2% RRSP

3 Strategy: Develop and expand rental properties Become more efficient at managing existing rental properties Tactic: Hire out property management Objective: Purchase two cash flow positive multi-unit rentals in 5 years Tactic: Identify financing options Tactic: Find an experienced real estate agent : - Scoping out 2 real estate agents Tactic: ID Communities to invest in Tactic: Join and participate in landlord association In Progress - Signed up as member of landlord association Strategy: Secure other forms of Income Objective: Have a part-time side gig for Mrs. Prairie FIRE when kids are in school Tactic: Support her home organizing and landscaping business Objective: House hack empty spaces/spate spaces and on our property Tactic: Host an international student during the winter 2018 Tactic: Be an AirBNB Host in the summer Tactic: Rent out section of back yard for RV storage/parking Objective: Have a cash positive blog business within three years Tactic: Integrate affiliate marketing Goal 2: Have enough money to pay for some of our children s tuition costs when they go for post-secondary education Strategy: Create and grow an RESP Objective: Invest contributions in an RESP portfolio that is growth focused Objective: Max out matching Tactic: Open RESP Tactic: Invest 100% equities Tactic: Budget and automate $416/month to go to RESP

4 contributions of $2,500 /child/year Tactic: Encourage friends and family to contribute to RESP for birthdays/christmas instead of toys/gift No started Strategy: Pay off All Consumer Debt within 2 years Objective: Establish a repayment plan to pay of debt Tactic: Create Budget and include debt repayment Objective: Reduce dependence on credit Tactic: Create budget Tactic: Have a $1,000 emergency (easy access) Goal 3: Be ly Debt Free by 2037 Pay off Mortgage by 2037 Objective: Make extra payments to Tactic: Have a 6 month unemployment fund (separate account) Tactic: Allocate any extra income and make extra payment to Tactic: Take any tax refunds and make extra payments to Tactic: When consumer debt is paid off, convert regular consumer debt repayment towards Our Investment Approach Tax Efficiency: Will shape portfolio to ensure the most tax efficient path towards our financial/early retirement goals Rather high risk tolerance: ( Accept market returns and try not to time the market Accept market returns and don t panic - stay the course during downturns Reduce Costs: To find the most cost efficient forms of investment that produce the greatest return. In this case market investments will focus on a diversified portfolio of index funds Downturns in the economy are expected and offer buying opportunities Asset Allocation Investment Savings Portfolio 43% Index funds - preferably Vanguard or whichever ones have the cheapest costs - tax sheltered 10% Bond indexes

5 35% US index (Partial small cap/partial large cap) 35% Canada index (Partial small cap/partial Large Cap) 10% International index 5% Ethical index funds Green energy Ethical index 5% Concentrated Block chain Marijuana 22% Risk parity index funds 25% Work pension matching program and tax sheltered accounts Aggressive growth funds - 100% equities 10% Play money - non-tax sheltered 50% Dividend portfolio 50% Ethical/local investments Post Retirement Allocation Once we reach retirement, investments will be allocated as follows: 40% Bonds 40% Equities 20% Cash or cash equivalent Drawdown Plan When we reach FI/Retirement, we will take a conservative approach to withdrawing funds from our portfolio. This will be at a rate of 4% per year